Why Passive Income is Better

Passive Income is a bit of a myth. Not so much in that it doesn’t exist (it does), but in what it really is, and why we should all be striving to attain as much passive income as possible. I’ve written before about what passive income is. But, in that article, I only wrote a short paragraph on why we should want passive income.

What is Passive Income

You should read the original post on what passive income is, but I’ll recap here as well. In a nutshell, passive income is income that you earn with little ongoing effort (work).

Why Passive Income

The why of passive income is really the motivating factor for most people. Many of you know the allure of free money, or easy money. And many of you will mistakenly think that passive income fits one or both of those categories. It doesn’t. The difference, and the reason you will still want passive income, is in the ongoing work part. With a traditional job, like the one I recently quit, you get paid per unit of work. If you work one hour, you get paid $x. If you work one year, you get paid $xx,xxx. If you build one widget, you get paid $xx. Your earning potential is directly tied to the amount of work you do. More work = more money. It’s a finite system. You can only work so many hours in a day, so you can only make so much money.

You’ll still work for your passive income, but, if it’s a true passive income source, you’ll be able to work less for the money as time goes on. The income is no longer tied to the amount of work you put in, except in the beginning. Please don’t think that passive income is easy, or that it requires no work. It does. In fact, you might work harder than you have before initiating it. But, once it’s initiated, the work can decrease if you want it to.

Passive Income Examples

One of the most common examples of passive income is rental income. You rent out a property, using a property management service, and all you have to do is sit back and let the rent checks roll in. Sounds easy, right? It is. But, you have to get there first. You’ve got to do the work necessary to have the ability to purchase that rental property. You’ve got to do the work to make sure that it meets codes so that it can be rented out. You’ve got to do the work necessary to find a property management service that fits your needs. And, even though it then becomes almost entirely passive, meaning you do no work to attain it, there might still be some occasional work that needs to be done, like deciding whether a repair should be done, and by whom. As you can see, there’s a huge outlay of work to set up the passive income stream.

Another popular example of passive income is dividend paying stocks. You own some shares of some companies that pay dividends to their shareholders, and let the dividend checks roll in. Sounds easy, right? It is. Again, you’ve got to get there first. You’ve got to do the work necessary to have the ability (money) to purchase those shares.

Passive Income isn’t Free Money

Passive income isn’t free money. I can’t repeat that enough. And it isn’t easy money. You’ve got to put some work in to set up the passive income streams first. But, once you’ve set them up, each day, week, and year, makes your work cost to attain those funds diminish. Until, at some point, your work cost per unit of income is fractional to what it would be in a traditional job. If a traditional job requires 1 unit of work for each unit of pay, over time, passive income might require 1/100th unit of work for each unit of pay. And, that, is why we should all want passive income.

For me, passive income isn’t about being able to sit on a couch and watch television while the fat checks roll in. It’s all about being able to pay my bills while I do the things that I like to do. This site, and others I own, help me with that (although they are far from passive, they aren’t traditional jobs for me either). I’m working on other methods of increasing my passive income stream as well. I’ve always wanted to be a published fiction author. I’m participating in NaNoWriMo to that end, with hopes of being able to self publish ebooks and use the royalties from that as another passive income stream. I like to take photos, so am going to be exploring avenues of making some income with that as well. It will require taking more photos, which is work, but, because it’s something I do as a hobby already, it’s a variant of a passive income stream for me.

What are some of the passive income streams that you employ? What are some of the things that you do as hobbies already, that you might be able to turn into an income stream?

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About Shane

I started this blog to share what I know and what I was learning about personal finance. Along the way, I've discovered the Yakezie group, and many other blogging friends. Please feel free to connect with me on Twitter , Google+, and Facebook

Well, there are ads on my blogs, but they haven’t brought in any money yet, but that’s all been completely passive. The only thing I did was ad a google ads widget.
Mostly, my goals for passive income, like some of yours, center around fiction writing and editing. I’ve already self published one coffee table type book (vanity/learning project) and am hoping to have another one out this spring (with potential to actually make a profit).
In addition, I am submitting my short stories to magazines and anthologies, and working on a novella that I am hoping to have completed come Easter.

In the past, I enjoyed rental income. You are right, it is a lot of front end work. Not everyone is willing or capable of doing. Currently, I earn dividends and capital gains. Not quite like Buffett, but a good start.

You’e right, it’s not easy to ensure continuous passive income. The myriad factors impacting your income are always changing. Tax laws, economic growth, disasters, poor company management, and other risks can all work against your pay check. It takes planning and foresight to ensure income disruptions are minimized.

Passive income is extremely difficult to ramp up. Most of them require serious monetary investment.
Rental income require a lot of money up front and usually it takes time before you get good positive cash flow.
Dividend investing also require large amount of upfront investment.
I would love to see what you can do with photography.
A successful book would be a great source of passive income.

Although I never have tried it (mainly because I don’t know of ANYONE who has succeeded), a lot of firms try to convince you that you can make good passive income with things like selling cosmetics – then recruiting additional sellers and earning money off of their sales as well as yours.

Our passive income is from interest and dividends and a vacation rental. I don’t yet have much income from my web properties and it certainly isn’t passive at this point!

I’m hoping to create some passive income. My partner and I have 2 rental properties representing 4 units, but the mortgages are so new that they won’t be giving us money for at least another decade. At least it’s established!

Yes, for folks like me interest income is pretty non-existent. But for folks who have millions in the bank, who I consider to be “rich” because they don’t have to work for their money anymore but their money works for them, their interest income could pay a nice annual salary for someone. Peace.

The joy of earning a passive income is that it is self-sufficient and reliable, even when you don’t put much effort into it. The key is to get streams of passive income built up, which will take some work to accomplish. In the long run, passive income is well worth the work that was put into it, since it generates a high rate of return for hardly any work.

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